Forex Brokers And Trading Accounts

This account looks at the factors to consider when you need to find forex brokers and the types of trading accounts that are available to you.

Forex brokers are a vital component of your trading career. They allow you to interact with the market. As an individual retail trader, you are not able to purchase and sell currencies directly on the market, hence you have to find a broker to trade with. The selection of a broker needs research and there are many factors to consider.

Is the broker registered with the appropriate regulatory bodies?

Does the broker provide you with a suitable trading platform?

Do you have the option to open a demo account?

How is the order execution handled?

Do they have good customer service?

What are the margin requirements?

What are the leverage ratios?

Do they offer data feeds?

How do they calculate their fees?

These are all the questions you have to clear with a broker before you sign up with one. Once you have decided on the most suitable forex broker for your needs, you will be able to open a trading account.

Forex Brokers Trading Accounts

There are different types of trading accounts you can choose from. They all come with their own distinct pros and cons. The initial investment amounts vary from one account to another and your forex broker will determine the amount. The leverage ratio you are offered is dependent upon the type of account you open and is at your broker’s discretion.

Mini Account

This type of account is suitable for novices in the trading arena. The value of a pip is $1 and the trading lot size is equivalent to $10,000. The advantage to this type of account is that you do not require a very large investment capital. Your risk level is lower due to the smaller lot sizes. However, to make a substantial profit with this account requires that you use high levels of leverage or invest more funds.

Standard Account

Most traders make use of a standard trading account, however it is not recommended for beginners in the trading market. The high level of risk is not suitable for them. A single pip movement in this account is worth $10, with trading lot sizes equal to $100,000.

Managed Accounts

If you opt for a managed account, you provide the funding for the account, but you leave the trading up to your broker. There are two main types of managed accounts you can opt for. The first is a pooled account. If you opt for a pooled account, your funds will be merged with a group of investors with the same risk tolerance level as yours. The funds are invested by an account manager and split accordingly.

You can opt for an individual managed account which means that your funds will not be deposited into a pooled fund. Your account manager will do all the trades on your behalf.

The advantage of using a managed account is that you will gain from the experience of the account managers. You do not have to spend hours analysing the market, placing and monitoring your trades. The disadvantage is that if you notice a swing in the market, you are not able to adjust your trades accordingly.

You should make a decision about the most suitable account for you based on your trading and business plan. The account you open will also be dependent on your level of funding and whether you wish to trade yourself or leave it up to someone else.